tv Squawk Box CNBC September 2, 2015 6:00am-9:01am EDT
business never sleeps, this is squawk box. >> good morning, everybody. welcome to squawk box here on cnbc. i'm becky quick. joe and andrew are off today. we start things off with the turbulent markets. let's get right to the u.s. futures this morning. yesterday you had the decline of 470 points. you can see this morning there's a rebound when looking at the futures but not enough to make up what we saw yesterday on the downside. s&p futures look like they would open up by about 17 points here and the nasdaq up by close to 45. the dow and s&p 500 had their worst first day of trading of the month since march of 2009. that 470 point drop was the third worst decline of the year for the dow. the others took place in the last 8 session ifs that tells you about the volatility. on august 21st the dow fell 539
points and 600 on the following monday. right now the dow and the s&p 500 and nasdaq all in correction territory down 10% or more from recent highs. nasdaq was down by close to 3% along from other markets as well. >> a big drop in apple again. let's check out the action in europe now. another volatile session in china overnight but here's how the major indiexes are behaving in europe. all of those up about .10%. italy is up about three quarters of one% and greece adding about .5% for its part. >> remember that nearly record three-day 27% rally for crude oil, it's well on its way to being wiped out. crude fell nearly 8% yesterday. it's down another couple of percent this morning and you can pick your reasons why. still strong production here in america, still concerned about iranian output, saudi arabia and russia still pumping out oil.
that is down 2.2%. >> also a busy economical ha car ahead today. it's the economy -- concerns about the economy that's been driving markets so much. at 8:15 eastern this morning we'll get adp's look at private sector employment for september. consensus forecasts call for 200,000 private sector jobs. there's a revision of second quarter productive numbers. it will show an annual growth rate of 3%. that's higher than the prior 1.3% estimate and at 2:00 p.m. eastern time we get the beige book. that's the region by region assessment of the economy. we'll talk about the financial market turbulence with treasury secretary jack lew. steve will have that interview for us tomorrow at 6:00 a.m. eastern on squawk box. >> everybody you know blaming china. they cover the wall street journal saying that china is the reason for our drop but i do
humbly submit this chart we showed on power lunch yesterday that we made for the show which is this, the s&p 500 going back about ten years. the reason we made this, i want to show that china has been slowing down but every time it slows down all that happens here is that we have gone higher. not saying that china's not the reason or that china is not important but their stocks have gone higher too. >> exactly. listen, the chinese stock market is only about 2.5% of global stock market weight. i'm not saying china isn't part of the market but it's a lazy headline. >> i think it's much more than china but china plays a key role in terms of thinking what happen with the economy there if it
catch understand with us that has people thinking these markets are priced to perfection. >> your point is well noted. it's important to note this as well and kelly obviously you have reported around the world too which is that we buy a lot of stuff from china. they don't buy a lot of stuff from us jack ma wants them too. >> if i ever need to buy 75 golf carts i'll go on alibaba.com. other than that, no. >> people in houston are looking for someone to blame. what happened? did you see what they said, 20 to $25 barrel for the next couple of years. they want to know why and the why does go back to china. >> well, again, going back through history and we have interesting historical stats coming up later on in the program but if you look at the price of oil, inflation adjusted we have bias because boil has been above 100 twice and i think we assume it should be a higher level than it is the inflation
adjusted current price of oil is 47 to $49 per barrel and we're still pumping 9.3 here. >> oil prices have just as much to do with supply as demand too. it's a new reality. >> the bear case for oil meaning the price could go down lower is this. we're producing about 2 million more barrels a day worldwide than we need. the bull case is that the kind of wells we're drilling, they drain faster just by the nature of the technology so the current wells that are out there will deplete quicker but we're still talking about a couple of years. >> i'm not sure to say how much this has to do with supply and demand. maybe the 1970s, real shortages, real gas lines but we've had
wild swings in both the price of crude oil, the demand situation, the supply situation, it seems to behave mump more like a financial asset that goes in it's own cycles and we're coming off a major one. >> the big concern for oil in america and drivers would lose this news is that we're entering the shutdown season so they can change their blends. we have too much oil in storage. some refineries come off line. inventories could build even further. so if you do believe in supply and demand, obviously you don't. >> do you remember the late 90s and it was like $5 oil forever. certainly you had all of these emerging markets coming into the world economy starting to tap demand for oil. that wasn't a low demand or extra high supply period and the oil price was extremely low. >> luckily we have smart people
waiting to talk to us. i thought lower oil was bad for the united states and people said you're an idiot because it's good for gas price and it is but when people save money they simply drive more or pay doubt debt. >> but they also -- the oil and gas industry, texas created 23% of jobs over the last nine years. those are high paid jobs and houston is only 11% oil and gas but there's a lot of derivative plays. entry level workers were making $20 an hour with benefits. that's going to stop. good morning. >> we'll talk more about this in just a moment but let's get you caught up on where the markets stand. after yesterday's volatile ride and the dow down almost 470 points you do see a rebound this morning with the dow looking like it would open up by 170
points this morning in europe modest advances there as well. the dax is up by a third of a percent. if you check out what happened overnight in asia you'll see there were declines but these were much more modest than the night before the hang seng was off by 1.2% the ten year note 2.161%. let's look at currency markets. at this point you'll see that the darr looks like it is holding up across the board. euro is at 11262. dollar yen at 12007 and gold prices at this point look like they are giving back just a little bit but still gold at $1,137.50 an ounce. >> that's fascinating because as
much as we talk about the fear in this market it's not like gold spiked to $1,400 an ounce. it's not like gold reacted to some panic. people aren't hiding anywhere. >> people are confused and if you thought the volatility was over think again. we've seen a lot of it this week as well karen is president and ceo. welcome to both of you. karen the one thank that really stands out is that the volatility is going to be here for awhile. what would change that picture? >> well, this september so we've started out with the september remember type of volatility. do i think this is the sign of the beginning of a very tough market? well it's been tough. the market is down 10%.
we can see that the market was 17 times earnings or close to it. valuations are rich. they have come down. we're under 15 times 2016 estimates right now. there's been job growth and unemployment is down and there's a lot of good things about this economy notwithstanding what's happening in china which is scaring the market but the market gets scared with the higher valuations. we have come down to a level that we think has many attractive stocks that are down over 20% with earnings growth that's strong. >> this all comes back to the economy and concerns that if it's slowing down it is something that will spread around the globe. what do you think is happening in the united states when it comes to economy? >> it's in good shape and if you want to know what's going to cause a return to normal levels of volatile at the don't want
normal levels of volatility but we want economic volatility. it's only bad if there's no economic volatility underlying it. it grows better in that environment because we favor creative destruction and always have. the u.s. growth prospects are good. u.s. labor market is stunningly strong. there's a reason we sold almost 18 million cars on an annualized rate last month. that's not a sign of an economy you have to worry about and, you know, there is going to be an impact from china but mostly when we look at the impact from china we look at the financial market volatility side and see whether that's picking up which obviously it has. the tough we sell is things people need for their economy. >> with high profit margins.
>> high profit margins. >> low margins coming this way. >> which is stuff with very low elastici elasticity. they have to buy it whether they want to or not. all the disruptions aside it's the direct economic impacts that are minimal in the u.s. >> what would you watch -- we know the job market is pretty strong right now but what other markets are you watching to try to get a feel as to whether or not there's anything that is bliping here so my favorite variable is claims. >> even the government can add numbers together. they report it to washington and they add up to 50 numbers and they give you the not seasonal adjusted and that number is at all time lows based on the percentage of the population that could file for unemployment choice if they got laid off but if you you want to see weak vns that's where it will show up.
>> you said you have a lot of stocks that you like. at this point it looks like there's even small american companies getting hit by that and that's the concern again that this contagion spreads here. if drew is right and we're doing well here, where do you look first as the places for those that have been unfairly punished. >> so we look for u.s. sen trick companies and some are tjx. it's a great retailer. it's showing strong comps and when you go to a homegoods for example you can't find what you're looking for online because they're changing inventory. the comps are increasing and the earnings groethd wth is rising. we like delta. they have been controlled in their capacity expansion. delta is a real beneficiary of
lower fuel prices which all airlines are but they haven't hedged their bets yet on oil. millennials don't spend their money on as much stuff. they spend it on experiences so the airline industry we think over the next several years will benefit from that trend. >> and low gas prices. >> exactly. >> i tweeted this out and it was a little sarcastic and it was unemployment is down, home sales are up, car sales are near a record as you noted, planes are full. why are so many people still not convinced that things are okay in america? >> because rates are at zero. >> and they feel like it's an entirely false zero interest rate policy based -- >> if a smart group of people in washington is telling you there's a problem with the economy that requires 0 interest rates, most average americans
listen because they think those people know something they don't. instead of just thinking to themselves am i employed do i feel comfortable spending money they think to themselves i'm employed and i have a good job but everybody else is worse off. >> if they were to raise rates do you think there would be a sigh of relief? >> i think the consumer would spend more money -- the thing that went up in price the most during this crisis was retirement costs trying to save enough for retirement is almost a fools errand. you can't. >> my father just retired and he's 75 years old and he's heavily invested in stocks because bonds give you nothing. real estate has a capital cost. >> most americans want a series of cds that pay something. >> and a job. >> they'd rather have a whole bunch of cds and pay off a little bit every time. >> there's one other point about
the market that's interesting that people haven't brought up much which is the supply of stock is down. so if you look at what's happened in the last five or six years companies bought a trillion dollars worth of their own securities back and when americans are feeling more comfortable or professional investors are buying stocks when index funds are buying stock there's less supply and that helps the price too right now. >> karen, drew, thank you for coming in today. it's great to see you. >> thank you very much. >> coming up with all these wild market swings you may deserve a break all day and mcdonald's may have the right menu for that now. find out when you can start ordering an egg mcmuffin any time you want. plus crude prices fall again this morning. steven will be our special guest as we head to break check out this day in history.
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good morning everybody and welcome back to squawk box. we are watching the futures as we countdown to the opening bell this morning. check this out. if you're just waking up we did see a bit of volatility yesterday with the dow down by 470 points. you're seeing a bit of a rebound. it does look like the dow would open up another 155 points.
s&p futures up by 17.5 points and the nasdaq up by 46.5. is japan ready for house of cards and orange is the new black? netflix making a move to stream it's way into asia. the company launching in japan today. netflix shares on a wild ride along with the rest of the markets down about 8% yesterday. netflix shares up by 2%. >> we are just over a week away from the first kick off to the nfl season and cbs is kicking off it's own plan. it will live stream two upcoming regular season games for the first time and they'll be free plus you will not need an authentication or subscription or cable provider. they'll also stream four playoff games and the super bowl. they'll be the jets versus the dolphins on october 4th and the panthers cowboys on thanksgiving day. >> wow, mcdonald's making the move toward all daybreak fast. the plan has been in testing
since marchand it will expand to its more than 14,000 u.s. restaurants starting october 6th. that mean you can have that egg mcmuffin or mcgriddle sandwich after that 10:30 a.m. cutoff. mcdonald's hoping this will give sales a boost. it's the first big menu move under the new ceo and take a look at shares holding in there on a tough day yesterday up about 2-thirds of a percent. >> this is a move i'm in favor of. we have critiqued every move along the way because mcdonald's we all think we know what they should be doing because we're big customer or testify area. i complained about how little the french fries were in the happy meals. i think it was just that place because i went to another one yesterday and they were much bigger. >> how often are you at mcdonald's? >> more often than we should do. >> i do love their breakfast. google changing their logo. the colors are the same but the font is clearly different. on the left is the old.
on the right is the new. >> why? >> the change comes a month after the company announced its major restructuring where google's new parent company will be called alphabet. >> that's the only thing i've seen that's not been blamed for the market volatile till. everything else is blamed. >> do you like it? >> i don't like change. >> so you don't like alphabet. >> no. >> oil posted a three day rally of 22%. down again this morning. it will cost you around 3345 per barrel now if you want to buy one. >> steven we talk a lot about stock market volatility. why has oil been so volatile? >> well there's stock market volatility and actual
volatility. on monday of this week we were thrown a curveball by the department of energy and they did a swif of 250,000 barrels a day. that is production was lower than the implied figures in the weekly data and that helped push oil to the moon on monday but near term the fundamentals are still there. in fact, this summer crude oil demand in the united states has never been stronger and yet crude oil prices fell 40% during that time period. we now go into the fall. drivers will be off the roads. we have the refinery turnaround. ie maintenance season. they'll be buying fewer barrels so we're taking a lot of demand. historically about 500,000
barrels a day to 1 million barrels a day of demand sabt ist to come out of the market. >> so you don't believe the recent lows have been put in steven. where would they be? >> i have told -- given this volatility i told my clients that i liquidated my positions from the day-to-day and week to week to bearish and neutral at this point oil around $40 barrel is disconnected from reality. so we're all trading on psychological numbers right now. we broke 40 and we've taken out that psychological barrier. the next barrier is the $4240 cent low we saw during the depths of the great recession. if i had to pick a number out of the air, 32.40 is now the target for the oil for the bears to be
shooting for. on the demand side we have concerns now. what have we seen from china this past year? cutting rates five times since november. they're devaluing their currency. the central bank has walked in and become the world's largest specialist firm. canada just went into recession officially last night. if we look at the pmi surveys the industrial commodity economies out there, they have been contracting over the last 12 months. the fall in oil prices just like the fall in industrial medal prices is the canary in the coal line. it's not all rainbows and unicorns out there and they're scre screaming. things in the united states are
area po better than most. >> how long can they keep pumping out more oil than the united states currently needs. >> that's just it. that's going to lead into what we should be doing. exporting this excess crude oil but we're about to see, look, the mps have been pleading. they're going to start to hemorrhage in the next couple of months because what we have now is that in the first quarter we had the price in oil fall but in the second quarter it bounced back but more importantly in the second quarter the back end of the curb in prices for 2017 and 18 remained high so they were able to edge forward production. hedging equals collateral so with that colal rat they were able to live off of the fed's easy money think the summer but now price versus crashed but the back end has crashed.
there's going to be a lot of credit that's going to dry up now for the e and ps. you're about to see a gusher in the 4th quarter and that does not bode well for supply, ie the cut back in production for 2016 but keep in mind that's only north american production. saudi arabia still has very little incentive to cut back production. >> it's a well noted point. that's why some of the debt of these companies is now trading at 60 cents on the dollar versus par a few months ago. thank you very much. appreciate it. >> thank you. >> when we come back this morning the currency wars. what's all the global market turmoil doing to the dollar trade? and has the slide in crude opened up opportunities in the transports? we have stocks to watch in the next half hour. right now take a look at yesterday's s&p 500 winners and losers. ♪ can a business have a mind?
that's what we call that new gear feeling. you left this on the bus... get it at the place with the experts to get you the right gear. office depot officemax. gear up for school. gear up for great. welcome back to squawk box. let's get a look at our headlines this morning. the u.s. auto industry is having a banner year when all the august auto sales figures were totalled up they registered an annual sales rate of 17.8 million vehicles well above estimates and happens to be the best month since july of 2005.
in the meantime the bankers association will have it's weekly reading on mortgage applications at the top of the hour. you'll be looking at the latest 30 year mortgage rates. they have been hovering around 3.8% recently and that's the lowest level in over three months. something else to watch today the energy department's weekly look at oil and gasoline inventories at 10:30 eastern time. a different inventory report late yesterday showed increased supplies and that's been a big contributing factor to the extended drop in crude oil this morning this morning it's down another 2.5%. >> obviously your markets are in focus after yesterday's 469 point drop on the dow. we're indicated you at the open this morning. indicating a gain of 155. on any other day that would look good. you'd say way up triple digits
but consider considering we los points yesterday perhaps a bounce back would be preferred. the worst performing stock market in the world over the last month is greece. we talked about greece for six years. now they're off the headlines because of china and the stock market is collapsing. just something to watch. the benchmark treasury note yielding not a whole lot. let's get a check on currency marks. we'll talk more about that if we can and the price of gold maybe not getting the kind offed by you might think given everything that's going on. they traded down to 11.38 per ounce. >> let's check out the european
market action. seema mody joins us now with a closer look from london. hi to you seema. >> hey, european stocks sea sawing between gains and losses. this after losing about 2% in yesterday's trade but a lot of traders are talking about a bullish call from morgan stanley. their chief strategist there says despite china woes they're positive on european equities forecasting a modest rebound. they like the banks and they have italy as their top pick. italy is the out performer up about .2%. china is the epi center of traders concerns. it's expected to be the topic of discussion tomorrow. economists say expect mario draghi to possibly hint to an extension. in the meantime, holding on to
112 ahead of the meeting. >> thank you for now. currency wars are heating up and taking a toll on the global market. let's bring in nick. good morning to you. >> good morning. >> when people look at china and we've had everyone saying they sparked the next round of global currency wars, are they right? >> i don't know. maybe it's an equity war because the currencies are relatively stable but we're seeing a lot of volatility in the equity marks and for the euro, the yen, the dollar it's the volatility that's the key driver. they're relatively stable. >> although they're spending a ton of money to make it relatively stable. >> they are and from a chinese perspective they still is a lot of levers they can pull. some countries have negative interest rates. they still have some more money that they can spend. it's a very challenging situation. >> but if china is now seeing it's currency move lower the ripple effect is pushing
downward pressure on other currencies, isn't it? what does that mean? is it different than when people are intentionally trying to weaken their currencies? in other words if the economies are weak and currencies are following them down how is that different than saying the economy is weak and we'll try to push our currency now. >> i agree that an unintentional currency decline is different from a planned currency decline and you're 100% right. currencies like brazil, south africa, russia, they're really under significant pressure and the key thing there is that it's very difficult to shall we say support your currency when it's moving against you so while this volatility remains and it might be with us for a little while, hopefully not too long they're probably going to be under pressure. >> when you look at the biggest currency moves in the world over the last month or two the
biggest percentage changes were whatever it is versus the aussie dollar. what are you reading from that if anything, nick? >> the current dynamics of the markets, most currencies are struggling or suffering. the currencies doing well out of this, shall we say volatility, are what you would call the low interest rates, the funding currencies, so you're talking about the euro, the yen and the swiss frank. they're doing well but they're under a lot of pressure. >> they might be doing too well. the swiss are saying we can cut the deposit rate further in europe. i wonder if they look at $1.12 euro and think to themselves this is getting a little bit uncomfortably high. >> a agree with that for sure. it's not particularly desirable so i think that you, you know, you could see some further extension of the policy measures like they said in terms of the quantitative easing and i think
overall while we're seeing this equity correction i would argue that 2015 we're doing better than we were in 2007 during 200 9d t. if you look at global gdp growth we're still positive 3% as opposed to negative as we were then. so i'm looking at this as being corrective. i'm hoping for stabilization in the market. >> hopefully it tells us if we're even comparing to that period. >> we already hit large corrections. we're down 20% and major equity markets we're down 15 or so%. stability will help the idea of a federal reserve rate increase. we believe that the currency moves we're seeing are corrective so overtime the strength we're seeing we think will start going down and if markets stabilize i think that does pave the way for the fed eight increase either september or october and the dollar should start doing a little bit better again. >> okay. thank you this morning. >> thanks, nick. >> meantime full coverage of
this global chaos continues here on cnbc. a live report from asia stocks there down but well off their lows. it just turned higher but as we head to break, speaking of currencies why don't we catch oup on the euro dollar move. $120 to yen and pound and u.s. dollar 15272. squawk box will be back on a busy wednesday morning. stick around. diabetes, steady is exciting.
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equity futures are indicating a slight bounce back this morning. 121 points is the implied up open and i would say slight though because we lost 469 points yesterday and not getting back nearly what we dropped yesterday although i will say this becky despite all the volatility and everything that went on in last week's crazy week and the big drop, the dow is still up about 2.5% over one week. >> right and if you look at oil prices we're talking about this huge crash in oil prices after this big run up, oil prices are where they were a week ago too. >> the reality is if a lot of people are off but a lot of computers that do not take locations then you're going to get the bigger price swings. >> we'll see if the volatility ends when people come back. we could be look at a lot of
volatility to come though. it was another wild session in china she has more on the market move. >> beijing is hosting a military parade on thursday to commemorate the end of world war ii. the russian president is going to be there as well as other dignitaries and today among investors people felt that the government didn't want to see any drama in the markets. still we did have a wild ride. the markets tumbled at the open by nearly 5% but brokerages came in and started buying up shares. we did get mixed messages here again. they were encouraging brokerages to clamp down on grey market margin financing. that was contributing to the do youward pressure. so the markets ended relatively flat. we could have a bit of a reprieve here.
it's probably not so great for industrial production data. that's going to be a problem going forward. >> eunice, thank you very much. eunice yoon from beijing. this growth slow down in china she has been talking about has been continuing to spook investors. scott kennedy is the director at the center for strategic and international studies and scott, eunice touched on a couple of different things. you have fears of a slow down and we're trying to figure out how it is at the same time that they're doing moves to try to manipulate the markets. i wonder where you think we stand in this grand experiment
at this point. >> obviously the chinese are trying to be awesome plastic surgeons and make sure at least this week the economy and the markets don't fall off but more broadly they have a big challenge ahead in trying to make sure that they can transition to a services and consumer based economy but that's been a very bumpy road for them as the growth has slowed down much more than expected. largely self-induced because they put the clamps on the real estate market last year. the anticorruption campaign has also slowed growth quite a bit so growth is off and they're trying to figure out how to get to a new glide path and that's bumpy for them. >> most people watching it think they have been ham handed in trying to get their arms around first allowing the currency to move a little bit and then trying to sure it autopsiened
it's just a little ugly to watch. >> it's worse than looking at folks making sausage because as you -- we used to think they might have been aggressive in foreign policy but we always thought they were good economic managers and they have thrown a monkey wrench into that equation and that's generating anxiety within china, outside china as we thought that these stewards were doing a good job and now it's very difficult to read what they're doing and what they say they do is different from what we see happen each day and that's going to be -- create a lot of volatility. >> we care about what's happening there but how important is it? most investors aren't invested in these stocks. >> you're right. because of china's capital
controls only about 3% of china's stock markets have foreign investors in them and u.s. is just a portion of that. so there's not a direct effect in terms of securities but it's the anxiety generated by china's slow down by the poor signaling so that's had a contagion effect that's fed into additional angels psy t anxiety about what the fed is going to do. it's been the world's factory floor and in general slow downs in china are going to have a chilling effect on the rest of the economy particularly in the rest of asia. >> there is a suggestion that china is moving further away from capitalism and more back toward a dominated communist state than any time in years,
what are your thoughts. >> the idea that we ought to look at china through the lenses of reform, you're going to be sitting at that park bench waiting for a long time. it's always a mix in tools. their goals are on keeping growth from collapsing and keeping the stock market at a relatively reasonable rate and keeping the currency from depreciating any further so we're definitely seeing the visible hand of the state right now but that's never going to disappear the goal is to make it more nimble. >> thank you for joining us this morning. >> coming up is it time to catch a ride on the transports. a couple of names to watch as the price of crude declines again. steve will bring it to squawk box at 6:00 a.m. eastern time
tomorrow. first as we head to break after yesterday's sharp downdraft here are futures. the s&p 50013 points above fair. stay tuned. you are watching "squawk box" on cnbc, first in business worldwide. this just in: 50 million customers' data was not compromised this morning in a security breach that didn't happen. wall street. not rattled. at all. no. not at all. not at all. i mean, look at the day. sir. sir. what went right? what went right? everything. thank you. with threat intelligence, behavioral analytics, and 6000 experts, ibm security will help keep you out of the news.
welcome back to "squawk box." some stocks to watch this morning. h and r clock reporting a quarterly loss of 35 cents a share after the market closed yesterday, five cents narrower than estimated. revenue beat estimates and the tax preparation firm announced, here we go, a $3.5 billion stock buy back program. shares responding quite positively to that block traditionally does make most or all of its profit in the fiscal fourth quarter because that does encompass tax season. at&t upgraded to buy from citi which points to both valuati valuations -- following a recent pull back as well as potential benefits from the company's recent acquisition of directv. no industry impacted as much by oil prices as perhaps the transports, trucks, trains and planes usually benefit from lower price. this dough use a lot of gas, after all. but what does that mean from an investment perspective? morgan brennan joining us now with a few names to keep an eye on the morgan? >> hey, brian.
the transports have gotten absolutely trounced. look at the dow jones transportation average down 8.5% the past month, down 16% this 2015, but some analysts are saying that the market turmoil we have seen has actually created a longer term buying opportunity though, certainly not for the faint of heart. go to the say that so, several names that offer growth, take fedex. it's down almost 14% over the past month, but citi added to the recommended list, citing e-commerce ex-poesh shaurntd company's express restructuring, not just city that likes this stock, the implied upside for fedex the next 12 months, 33%. now, another name to check out, the truckers, sold of you pretty steeply, switch transportation down 23% in the past month but analyst consensus for this stock, 61%. now, avondale partners donald broten says swift and other truck load carriers, he likes
them because ben fit from cheap fuel and a strengthening u.s. consumer. lastly, hold on to your seats for this one, union pacific. this is one of the biggest transport losers this year, as rail volumes have tumble bud morning star's keith shoemaker says ups diversified portfolio and ability to improve operating margin are the reason he likes the stock. he thinks shares actually have 37% upside over the next year or so based on yesterday's closing price. brian, some names to check out. >> all right, morgan brennan. thank you. when we come back this morning, we will have more today's top stories. plus, yes, investors have been stomaching a big market selloff, not all the stocks fell the pain. we will bring you the s & p 500 companies holding off the best. stick around. "squawk box" will be right back.
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market alert. futures on the move after a wild ride in asian stocks overnight. we have got the info you need to get ready for the opening bell. not sure where to put your money? don't worry, you are not alone a closer look at the safe haven stocks that are weathering this global market storm, but plus picks to buy on the dips from a four-star fund manager straight ahead. auto sales were down in august but not as bad as expected. we have new numbers from america's largest auto retailer, first on cnbc. the second hour of "squawk box" begins right now. live from the beating heart of business, new york city, this is "squawk box." >> welcome back to "squawk box", everybody, this is cnbc, first in business worldwide. i'm becky quick, along with kelly evans and brian sullivan. joe and andrew are off today. check out u.s. stocks coming off
their worst start to a month since march of 2009. dow actually dropped 470 points, marking its third worst decline of the year. the dow, the s & p and nasdaq at this point are all in correction territory. that means they are down by 10% or more. check out u.s. equity futures at this hour. on the heels of all that you do see a rebound but again? only a partial rebound when you consider the 470 points lost yesterday. this morning the dow futures up by 128 points, s & p up 13w50i 3, nasdaq by 36. >> you see this flash we ran on mortgage application? i got to get into the numbers to see which were new purchases versus renice, up 11.8% week over week. you referenced 30-year mortgages worth 3.8%. >> where they have been. amps good friend of mine is a realtor, he has seven contracts right now working, the most he's ever h the housing market, i know everyone is worried about china and everything, the housing market remains strong, a big jump in mortgage. see what percentage of refi, doyle that as you guys elucidate
with your dulcet tones. among the stories we were watching a wild session for china's shanghai composite, index rallying from losses of 4% to close marginally lower. stocks bolstered from chinese brokerages to boost shares. turning around now into slightly positive territory for the german and france index, up nearly .2. the ftse are back. italy and greece better. >> i got the numbers. refies up 17%. that's huge number. >> highest level since april. >> purchase -- i don't look at refies as much unless they are being cashed out, people are taking it to buy boats and cars and we know that ends well. that aside -- >> don't you think this time of year, seasonally strongest period. >> home depot does, lowe's does, take that money out and maybe upgrade my house. don't do that, folks, necessarily, not all the time. purchase money applications, in
other words, i'm going to buy a home, rose 4%. that's big jump. the housing market, despite lack of inventory in many markets ash month of inventory in seattle remains strong. today's economic cal len dear, the a dp private payroll report and that's in a little bit, 8:15 a.m. eastern. forecasters expect an addition 20600,000 private sector jobs in august and a lot of people looking aneed friday's jobs reports on the back of that and revised productivity numbers for the second quarter and watching the price of crude again this morning. wti fell more than 8% yesterday that nearly wiped out monday's gains. at this hour, further weakness, down another 2 almost and a half percent, $44 a barrel. brent, sharply weaker yesterday, also falling nearly 2% again this morning to below $49 a barrel. natural gas, as ever, continues to stay extremely low. the global market selloff has been brutal floor widely-held stock but there are safe havens to be found.
dom chu has been looking this over and not an easy task, dom. >> is not. some of these are wide -- more widely held because they are in thesome & p 500 large cap index but not amongst the most widely held, not the at&ts or googles or apples of the world but decided to screen for them. thesome and p -- the s & p 500, 500 companies in the s and pable looked for on the ones positive during that stretch since the close on august 17th. 500 stocks becomes just 17, guys. of those 17, we look for only the ones that still have year-to-date gains, meaning they not only weathered the storm here but still had some medium-term strength in the market. that 17 gets down to just five. here are the five stocks, all right? you got some great names. cameron international, smucker's
agl resource and signet jewelers, up from marginal games, hospira, up to that 33% gain for cameron. now, three of these five companies have one thing in common, we are going to show you now, x them out now, hospira, cameron and a gl resources, agp, if you look at those three, those are all names that are in merger and activity-related transaction. those ones we are not going to include. that just leaves smucker's and signet jewelers. they are the only two stocks in thesome and p 500 that have held up during the current market melee, still have year-to-date begins and again, speaks to the story of the consumer. very much the consumer staple side, smucker's up 4%. signet jewelers, the discretionary side, own jails in, kay jewelers, jared, the gallery of jewelry, up 8%. the consumer very much a focus here. smuckers a, the only one of these two stocks, brian, that
has a dividend yield of 2.4% north of where the current ten-year yield is trading now. smuckers a, a name like that apparently for investors with in the market melees, has to be good. >> with that pun, got us out of a jam, dom. >> i see what you did there. >> i won't do it again. dom, thank you very much. mon on this market, bring in super early or super late, depending on how you count it, from los angeles, gina sanchez, founder of chanty go. gina, start with you, you probably didn't go to bed, let you get out of here and take a nap. you are a global specialist, you travel all over the world. should we really fear china? i brought up a chart earlier in the show show despite china slowing for four years, the u.s. stock market and the chinese stock market have done nothing but go up. is this the headline-driven fear we are giving it? >> i think you're ascribing something that is happening and
it's really -- it's massing this whole situation which is all that time you said china was slowing but we were going up, we were injecting incredible liquidity into the u.s. market that liquidity has masked a lot of issues much the question that i have is are we engineering miracle here or is this an illusion, right? if you look back, when china had their chinese miracle in 2009, that was pure liquidity. now the u.s. seems tonight only country in the world that is -- that is accelerating while the rest of the world is decelerating. doesn't that make you question what's going on? and what's happening in china is really what's eventually going to happen here in the u.s. when we start our tightening. and this tightening by the way, brian, it's starting and through central banks drawing down their reserves. we are looking at something that is important and what happens in china is leading it, a catalyst, but a catalyst to a much larger
problem, a monetary tightening. >> i think people, alec, i don't want to speak for the viewers and listeneners, all walks of lives and strategies and whey the heck does this mean for me? in five years is my 401(k) going to be higher or lower is. is china going to wipe out my investments? >> i think one thing that's interesting in the current market environment is we have obviously china slowing more than expect, the market reaction is being exacerbated by the fed, as mentioned, is contemplating tightening. that is where we think this recent bout, scare, keeps them on hold in september. i think if we are right about that i think that's going to stablize market, at least in the near term. i think a lot of the concern is we have china slowing more than expected and a fed that seems to be determined to tighten poll shape combination is leading to a worse fallout from markets than would other by be the case. hopefully they stand pat and if
they do looking for dubbish guidance. i think the market needs reassurance, the prior guest mentioned, not on the verge of a significant tightening cycle at a time when maybe the global economy can't handle t >> gina, why do we fear the ted? in 1994, the fed reserve raised rates aggressively, the 1995, the dow 1350rd 3%. we act like a quarter-point rate hike is the end of the world. a quarter-point rate hike isn't going to make any difference, we know when the fed starts tightening, they are going to go really slow. i don't think the question is, you know, what's happening with the fed. the question is does the fed make a mistake, meaning are we -- is this real demand that's driving this up? went fed tights because there's real demand and the economy is overheating, that is actually good thing, brian. that's why a year later, your going to get the markets doing quite well, because the economy is quite healthy. i'm not sure this economy is quite healthy. we are seeing job numbers, we are seeing a recovery, this is all good, we need to continue to see this and we need to build
year-over-year and continue this recovery, but's going to be slow. and so, everybody knows that because of that the fed has to go slow. so any sign of tightening around the fed that the fed has no control over is really the question and that's what i'm pointing out. central banks are drawing down a major liquidity source which is their reserves, in order to defend currencies. brian, that's tightening. >> by the way, alec, haven't been many polices to hide in this market, certainly days like yesterday almost all comp months of the s & p 500 were down, dom highlighting for us, very few areas higher on the year. >> i can't believe we teased dom, tell you the safe places, 1% of the s & p 500 up. >> two stocks. >> so if the yield plays and the dividend plays and whatever might traditionally be thought of isn't working, how are you telling people to position right now? >> we are not too focused on trying to position every tick here. one thing i think is encouraging is by the time stocks that have held up pretty well start getting, you know, pulled into the malaise, margin calls,
people selling about what they can, that kind of dynamic, that's usually happening closer to some kind of a buy. we haven't had a 10% correction in four years. historically, we have one every year and a half. whenever we go through something like this is a potential thesis that can take the market lot lower. that's why people sell. most of the time, that doesn't play out. we are recommending that people stay the course here. we don't think china suggestion the world into, you know, a global recession, we get an earnings melt down. yes, there's uncertainty out there. but we don't think that you want to panic around it. >> i think to brian's point earlier though, most home are looking at this think, okay, if i'm a long-term investor, that's not a problem. if you are nearing retirement age, you have got a very different scenario on your hands. a scary place to be and by the way, home are nearing retirement are probably in a much riskier position than two have been 20 years ago because they have been forced to push out. >> yeah. there's no doubt. swhoun is nearing retirement needs to have less of an equity mix and the one thing that's
been positive about this we look a lot at multiasset income. core bonds, barclay's aggregate, mostly treasuries, not going to get you the real income above inflation that you need. you have to look at alternatives. a lot of those alternatives in this recent selloff are a lot more attractive, high yield, mlps, senior loans, all of these things need to be part of the multiasset income mix for retirees and the yields are up as prices are down. so there is a bit of a silver lining for all of this for soon-to-be-retirees. bottom line, gina is china going to bring down the world? alec said no. what do you think? >> look, i don't think china is going to bring don't world. i think that we are doing that probably a little bit on our own. we have amazed an enormous amount of debt that we are going to have to digest over the next 20, 30 years. so, i think that we have capped the level of growth that we can expect and that means that sources of income are probably
going to be really important over the next ten years, so, i think, you know, what -- what the other guest is mentioning, that's absolutely right. every investor has to be looking for good sources of income now and good yields and that's the challenge. >> all right, alec and gina, good discussion as always. gina, get some rest. thank you very much. 4:14 in the morning in los angeles. that's dedication right there. >> thank you both. coming up, major automakers beating sales forecasts with declines that weren't as severe as expected last month. we will get a read from the country's largest auto retailer when auto nation sales numbers are next. another volatile session in china overnight. a run down of the ways chinese regulators might still intervene in these market. a four-star fund manager joins us with his best investment ideas. why he is doubling down on a blue chip tech name down 10% this year. in the us, three in ten college students drop out. but how can you spot who's at risk? the one who lives far from campus?
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welcome back to "squawk box", everybody. it is 7:15 here in new york city good morning. thanks for joining us. futures indicating a slight bounce back from yesterday's 469-point loss. right now, dow future indicating an implied open of up 124. good, becky on any other day, i think following the decline yesterday, maybe not the snap backs i would hope for. >> normally, 125-point gain in the morning, get your attention for the futures.
last week and a half, maybe not so much. let's talk about auto sales. auto nation, which is the largest automotive retailer in the united states, releasing its sales figures the month of august. joiningist now first on cnbc is the results is mike jackson, chairman and ceo of auto nation. mike, great to see you this morning. >> becky, great to join you this morning. another good month for auto nation and the auto industry. the numbers themselves are a bit quirky because labor day has moved into september this year versus last year, it was in august calculations. so direct comparisons are a bit quirky. if you go to the selling rate that adjusts for that it's 17,800,000, that's fourth month in a row for straight, above 17 million. five out of the last six months above 17 million. and the stampede for trucks picks up. imagine, car sales in the month
of august are down 10%. truck sales run 10%. it's just unbelievable, the truck plants are running at absolute capacity, as phil lebeau pointed out yesterday. but brirng the story is that housing in the u.s. is strong. autos in the u.s. are strong. no disruption in the auto sales from what's going on in the equity markets. so the industry is its on way to breaking through 17 million units this year. >> mike, do you shake your head when you look at the stock market and look at the concerns and look at the major selloffs and then look at what's happening in your stores? >> no, i really don't, because i think the fundamentals in the u.s. economy are pretty good at the moment. >> that's what i mean, the stock market is acting as if we are headed into a big downturn for the economy. what you're seeing is a very different picture. >> a very different picture, so, i'm in the camp of it's a buying
opportunity at the moment in the equity markets, if you're u.s.-focused and u.s.-based. gdp is moving above 3% at the moment. house and autos are strong. when you see what's going on in the equity markets and auto industry bringing this kind of number, it means the consumer on main street is plowing right through the volatility that's currently occuring in the equity markets and care less what is going on in china. all that bodes well for car sales and even go far to say, even with somewhat higher rates next year, we will probably breakthrough 17 million again. >> mike, you've always been very straightforward with us, when you see things taking a downturn, you have been straight forward about that, too, back in 2008 and 2009, out in front of it saying things are terrible. we need help on this front. but what -- what are you watching?
would you necessarily be somebody who can see it before the downturn really came? what would be your hint that things aren't going as well? >> becky, i'm fundamentally convinced that the auto remains a cyclical business and those who says a he is not, a new paradigm are in denial. and i think we still have years of good auto sales to come, but when inflation rears its head, which ultimately will happen at some point, and the federal reserve says we are going to raise rates above normal to tamp down inflation, car sales will decline and housing sales will slow. that is as permanent as gravity. but i think that's few years over the horizon before we see that. i see no signs of inflation. when i see it and the federal reserve decides to do something about it, car sales will slow.
>> mike, i'm glad that, to pick up on this particular point, a lot of people wondering how sustainable 17 million sales pace can be in this country. we haven't really seen that for some time, other than out of the dotcom era for a little while during the heavy incentive loose financing days and your dealerships, people are driving around the country seeing these gleaming new dealerships with all kinds of amenities, several floors in some case and wondering whether these will end up being white elephants to a period of demand that won't end up proving sustainable. >> i really think the sustainable trend run rate in the auto industry is high 16 million, low 17 million units. and you have to remember that we had a depression in auto sales in '08, in '09, the average able for the 250 million cars in america is still 1175, 11.6. so there's still tremendous replacement need. there's exciting new products
from the manufacturers, even with somewhat higher rates, there's still extremely attractive and unbelievably, gasoline prices are now $1 a gallon lower than a year ago. so, you really have perfect circumstances for car sales. i'm not saying the rate of increase will slow. you know, we used to have double-digit increases coming out of the depression. those are over. we are at a sustainable rate, high 16, high -- low 17 million. that's sustainable for the next few years, until inflation comes along and the federal reserve decides to raise rates above normal. >> i'm going to steer this interview right into the ditch, because this question has nothing to do, personal wave of mine with new cars. i have a newer car and i have a 2002. i'm driving the 2002 more because it doesn't have a stupid bell or whistle going off every
single day. what is your personal feeling and your customers complain that these cars are so advance thaefrd day, i've got some flashing light when my right front tire loses a pound of air pressure, i get a bright flashing warning signal indicating that the car's going to blow up at any moment or the windshield wiper fluids is low. do you feel like cars have gotten just almost foolishly complicated? >> so brian, i don't want to call you out as odd -- >> do it, man. everybody else does. it's fine. >> the vast majority of our customers coming into the show room, here's what happens, they can't believe the innovation that's in these cars compared to five, six, seven years ago, let alone going back to 2002. and they are thrilled with the bells and whistles. now, research shows that they only use 60 to 75% of it. but the fact of the matter is the cars are tremendously safer
with all these bells and whistles. by the way, that warning light on your tire pressure is meaningful, both from a fuel economy point of view and a safety point of view and the technology in these cars today are helping consumers drive safer, they are saving lives as well as all the enjoyment and conveniences that come with it. so, they are thrilled with the shiny new dhaers see in the showrooms. they wanted to work more intuitively and they don't have to think about it as much. working with all the manufacturers on that issue. some of the complexity how you interact, that's legitimate issue, but in principle, brian, they are thrill thrilled with the innovation. >> talk about the industry and the manufacturers. fiat cries leg the idea of trying to merge, combine, take over general motors. i mean, general motors is not interested but sergei mark yoani over the weekend made it sound like he might consider the idea
of going hostile, to some extent. what do you think about this idea and what do you think about whether or not something like that could ever pass muster with regulators? >> well, sergio is one of the brilliant strategists in our industry and you can't refute the industrial logic. it's very compelling for the merger. however, you need a dance partner willing to dance. and gm is right to say that the complexity of putting these things together is monumental and the auto industry's history is strewn with mergers that fail. so, trepidation and ret sense on gm's part is entirely understandable. they say they've strategy that they do not want to be distracted from executing. so, there's an argument on either side and how it will
develop, i don't know. >> odds on? >> but what i see is fiat chrysler sees the logic for it, but it can also go on its own. i just came from their big dealer meeting in las vegas. they showed the products for the next three years for their entire portfolio and it's absolutely sensational. so they have options and different ways to go. so i'm sure it will be an interesting and fascinating story to watch unfold and sergio, you know, is one of the great consummate dealmakers of all time. so it will be highly entertaining. >> mike, thank you. always great to see you. >> great to see you, becky. >> i got a couple people wrote in saying they agree about me. one pound of air pressure goes out my right front, i got a flat warning signal on my car. >> luddites among us. >> not a luddite at all, just driving me at all. stephen colbert, play is heard him, takes over the late show next week, but before that, speaking of cars, he may be
warning but potholes and police ray couldn't side of the road? what are we talking about? we will explain, next. you probably know an hov is a high-occupancy vehicle, but what is an rov? the answer when cnbc's "squawk box" continues. ti... ti... ahhh- ahhhhhh. liberate your spine... ahhh-ahhhhhh......aflac! and reach, toes blossoming... not that great at yoga. yeah, but when i slipped a disk he paid my claim in just one day. ahh! so he had your back? yep. in just one day, we approve and pay. one day pay, only from aflac. [duck snoring]
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you probable know hov is a high-occupancy vehicle but what an rov? robot-operated submarines. >> now you know about robot submarines. good morning, america. that's different show. welcome back to "squawk box", cnbc, first in business worldwide. among the store front and center, puerto rico's electric power authority reached a deal with a group of bond holders. essential lish the agreement will see that group take a 15% haircut in their debt owed as puerto rico tries to work out from a debt crisis. meantime, big guys, mortgage application jumping 11.3% last week according to the mortgage
bankers association new home loan requests up 4.1%, refinancing 17s for a five-month high. we are less than an hour away from the august adp job report at 8:15 a.m. eastern time. economists think the report will show the u.s. economy added 200,000 new private sector jobs last month. we will have those numbers and instant analysis, the moment they are out. check this out. navigation app ways adding several new celebrity voices to its turn by turn direction service. for example, new england patriot rob gronkowski added as part of a partnership with dunkin' donuts. in addition to directions, he will alert to you nearby duncan restaurants. hey, get to dunkin'. neil patrick harris can give directions, part of his promotion quarter his show "best time ever" and stephen colbert's voice, before his take joefrn cbs. take a look. >> heavy traffic reported ahead. ugh, traffic, my least favorite
kind of jam. followed by apricot and toe. >> it waze added a feature that alerts drivers then approach accident-prone intersections. a crown, i have a crown on the icon. >> how often are you doing that? >> constantly. >> apparently. >> a long commute. in my car that keeps -- pinging and banging. >> not supposed to do that while driving. >> something dangerous, what ever a. >> like this over on the side. >> other things maybe off the side of the road. auto accidents up for the first name a very long time. >> i'm not texting, not driving, voice alerts and stuff like that saying most people probably turn the auto alerts off. >> like the dunkin' donuts one. >> gronk, what you would pick? turn here, kelly. >> absolutely. >> tire's deflated but you didn't order it. >> your car will tell you that any bay. you don't need gronkowski. why don't we look at the u.s. equity futures. yesterday, saw the huge drop,
470 points for the dow. this morning a bit of a bounce back, only making up part of what we have seen. dow futures at this point look like they are up by about 141 points above fair value, s & p futures up 15, nasdaq up 141678 look at the praise of oil, which is continuing its declines, after a massive drop yesterday. you can see right now, down by about 96 cents, another 2% decline, 44.45 the latest for wti. we come back, more wild swings in china's markets overnight as well. the shanghai composite down 4% before rallying into the close. equity and currency markets in turmoil as well. we will ask an expect from the eurasia group what policy make letters ---makers will do next. stick around. "squawk box."
they have left to fight the economy? is it is on the front page, "the wall street journal" cover of the "economist ""what can they do to shore up their markets? >> i think there's a difference between what they can and should do over the relatively short term and what they should be doing over the longer term. those are cross purposes. you can sling a lot of stimulus that the economy to get growth back up over the short term but not clear that would help what they want to do over the longer term, the effective transformation of the can he away from the engiaw away -- committee away from what power it hed it. now they need to become a consumption-driven economy. reacting with panic to what happened recently we think is productive. the good news is we think that they are not that likely to
actually succumb to that temptation. >> the one thing would you have to do is power the middle class and china, so they are spending and starting new businesses, using capital for good purposes, nothing that happened in the last couple of weeks would really shore up confidence there. if anything, it's made people more hunkered down about what the government is doing, the explosions haven't helped. >> clearly. i think there is -- there's an underlying trend in the economy, which is -- which based on the consumption site, seems favorable, consumption a pretty 9, 10% every year and deeper structural strength on the consumption side of the economy, the world's largest market, world's largest online shopping market. definitely what happened with the stock market has impacted confidence to some degree.
what they need to do going forward is engage in reforms about multiple aspects. one is decontrol the financial system, the positive rate which they have done. we expect the government to push through the reform the next few years. reform the state-owned enterprise to make them not necessarily privatize them fully but make them more responsive to market signals through creating holding company structure. one thing we will focus is whether they focus on profits or employment. >> why should we trust they know what to do? majority of men, almost all men, controlling this economy, were born and raised largely in a communist -- still is to a point, you understand my point, not anywhere market driven. people that grew up in an economy not market based that
are now trying to instill confidence in the world they know how to operate a market-based economy by throwing short sellers in jail? why should we trust they even know what to do? >> there has been a substantial portion of the economy exposed and that's exports. some sense it is easier for me to know what china is not rather than what it is. for instance, compare to the soviet union fail, sfwhauts world's most successful manufacturing export economy, russia, which had a communist party, soviet union a communist party, a tiny player in global manufacturing. it feels in some way that ate appropriate model to merck at least is to look at the other developmentalist states of east asia, japan, korea, taiwan and not withstanding a fairly heavy hand by the government, you did have a --
>> making such an interesting point. what i don't understand about investor mentality. if i gave you two options, guys and i said you could invest in a chaunt is not growing but the average income is about 35,000 a year, they have got a long lifespan, a great education system, they are modernized, export driven, sophisticated economy or economy where the average income is $5,000, many people are poor a demographic nightmare coming up, but yeah, they have been growing fast, which one would you choose? probably choose the former. that's japan and everyone hates it, or did, nikkei has done well. the point is they ignored japan and go to china, japan is sophisticated and educated and we know they know what they are doing. >> well, i think you've had -- in the case of japan what you had, a shift in monetary policy, got people interested in japan once again. i think the argument really is about -- when you look at emerging markets in general, i think the question is what is the capacity and the potential
for convergence? what is the ability, both in economic terms and political terms of leadership to fuel that converge jones? as i said before in the case of china, you have an economy that has --s's different from other emerging market economies as well. what you do have an extraordinary successful manufacturing export sector, do you have a middle class that's -- that's about 1,000150 million people. they do have -- and consumption has been growing well. there's a level of underlying growth in that sector reflected in things like online shopping, tourism, all manifestations of -- >> we have to go, kar. boil it down for us, do you think they will come around and shore up the economy and markets will be allowed to shake out and find some equilibrium or no? >> we think that over the short term, you can still see some vol
at this time, particularly in the stock market, but over time, we are much more confident about the ability of this government to proceed toward a restructuring of the economy. >> all right, and that's what it's going to take. thanks for joining us. appreciate it this morning. coming up on "squawk box," finding value in the global market turmoil. we are going to get stock picks from a four-star fund manager, next, up media, teching no and financial services, those names ahead, futures indicating a triple-digit gain at the open. we are back right after this. ♪ every auto insurance policy has a number. but not every insurance company understands the life behind it. those who have served our nation. have earned the very best service in return. ♪ usaa. we know what it means to serve. get an auto insurance quote and see why 92% of our members plan to stay for life.
welcome back to "squawk box" on cnbc, first in business worldwide. u.s. equity futures rebounding after yesterday's 470-point drop in the dow, one of the worst starts in september in years, the dow implied to open 156 points, above fair value, 17 points higher on the s and p 500, 45 higher on that nasdaq. stocks tumbling to their worst start in september in 13 year yesterday, driving the dow, s & p and nasdaq back into correction, down 10% from the high. you're supposed to buy low and sell higher. joining us now a few stocks to batch, matt mcclenon managing
forth-star global eagle fund, got about $49 billion in assets under management. matt, welcome to the program. you know, i know people knock it, they knock the financial media and say why is every drop a buying opportunity in i'm 40-something. i'm going to retire in 20-something years. i suspect stocks will be higher by then. i hope. if not, we are in big trouble. i would like to purchase them now for a little less than the day before. i suspect that's why we do it. are there names thought that you think have fallen way too far and are great values right now? >> i think one still has to be somewhat judicious in a market like. this at first eagle, we are very if he cfocussed on the downside you look at the issues playing out in china and the western world, we feel still plenty author market to digest. the market has corrected, as you mentioned, 10% but come from 20 times trailing peak earnings, well above historical norms, a
pretty high valuation lie long-term postworld war ii standards an environment where certain opportunities helping themselves. >> respect drops healthy? more nervous when stocks go up every day for four years than if we have a 10, 15% drop -- why is that a bad -- no offense -- we act like it's a bad thing. >> i think the collapse in china's equity sass healthy part of an adjustment from what was an inflated market level, the u.s., we agree, lower prices afford opportunity for long-term investors. for us as value investors, we view volatility as our friend, not our enemy, one should look selectively in corrections like this for opportunities. >> some of the names you guys have in your top five, oracle, microsoft, comcast, bank of new york, mellon, these are names that are struggling. >> well, what they all are though are businesses generating cash flow year in, year out. these are businesses that have very strong market positions, that have attractive free cash flow yields and we have been
able to purchase with a margin of safety in price and capital stlurk and i think these are the kind of investments you want to make in a market environment that's not yet bargain basement. >> what's your time horizon? >> that report time horizon. >> 30 years? >> actually, five to ten years from when we invest. average holding period for equities in that six to seven year horizon. we view ourselves as owners of businesses, not rents of businesses. >> warren buffett? >> an investor we have admired for many years. he has had a long-term track record of identifying franchise at reasonable price and upping them the long-term. >> i love that you love our parent company of comcast, i think we dual here, however, we will take the other side of this cable cord cutting is happening. the move toward independent stand aloans, apps on things like apple tv is happening. content costs are rising. at the same time, why would a company like a comcast be attracted to you media has been just crushed in the last who couple of months? >> very simple, you cut the
correspondent, you still need to access the content, who provides that access, comcast? whether accessing the cable directly or content by the internet, you need comcast. >> for the longest time, the story has been comcast. the reason they wanted to buy nbcuniversal was flesh out and make sure there was something more than just pipes there. we reverted to the pipes the better end of the business? >>ed pipes are the better end of the business. incredibly hard to replicate that infrastructure, trying to get into that business, sub scale. also got to look at when comcast bought nbc. they bought it just after the financial crisis. they paid a reasonable multiple of cash flow. this is a company been focused on doing things right for shareholders and we think that's applied out in terms of the last few years. >> real quick, matt, on energy, an area buffett did move into recently, do you see anything there, if you're in this five or ten years that you like here? >> energy prices clearly
collapsed from 100-plus down to the 40s range, that does present certain opportunities. the upstream producers reflect prices higher than the forward curve. where we found value, some of the specialty equipment supply, clearly, the fundamentals for these companies are very nebulous for the next 12 to 18 months but companies like national oil, the largest holding in the energy arena, traded low single digit multiples peak earnings power and yet still a healthy private market acquisition market for these companies. you see cameron, haliburton deal, these transactions are going at double digit ebidta multiples and you have the opportunity to buy into some of the well-positioned companies at multiples. >> thank you for coming in today. great talking to you. >> thank you very much. when we come back this morning get to the big movers ahead of the opening bell. your list of stocks to watch coming up next. a programming note for,
negative analyst report from go pro ta pro. analyst is warning of possible risks to go pro's next set of quarterly results, including demand may be falling before below the company's estimates, shares down 5.8%, am barrel la shares down 10%. hasbro upgraded to overweight from neutral at piperoffry. a recent pull back and there should be help from the star bars-themed tours. college football kickoff week. the rutgers university star let knights closing out training camp with an offense versus defense dance battle. there you go shake it out. kevin wilkins the consensus winner. they are opening their season against norfolk state. >> see how effortlessly he did the worm? >> glad you are opening with a
powerhouse game like norfolk state. >> the smack talking guns. coming up, friday's jobs report, adp private payrolls in a few minutes. mark zahnby here to break down the numbers. ♪ no student's ever been the king of the campus on day one. but you're armed with a roomy new jansport backpack, a powerful new dell 2-in-1 laptop, and durable new stellar notebooks, so you're walking the halls with varsity level swagger. that's what we call that new gear feeling. you left this on the bus... get it at the place with the experts to get you the right gear.
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happening now, u.s. stock futures pointing to a higher open, we countdown to key data on jobs and the economy this hour. the numbers and instand analysis straight ahead. a black eye for black gold, crude oil tumbling off the cliff again what is driving the wild swings, the next stop in the 50s or back to the $30 a barrel range? stick around to find out. all that plus a pulse check on transport stocks poised to pop, cramer's take on the markets in turmoil. the final hour of "squawk box" starts right now. live from the most powerful city in the world, new york, this is "squawk box." >> welcome back to squawk box this is cnbc, first in business
worldwide i'm becky quick, along with kelly evans and brian sullivan. we are 90 minutes away from the opening bell on wall street. check this out. see the future are indicating a higher open, dow futures up by 164, put that in context with yesterday's decline of 470 points. s a & p stronger, too up 18 points now, open right now the nasdaq would open by 49 points. also, take a look what the's happening in europe at this hour. some modest advances across the board there you can see the dax, the ftse, all looking higher, the dax up by a quarter prance as is the cac. italy, major index up 10% and greece, half a percent. >> what a investors need to watch today. first up, the adp report less than 15 minutes away, economists looking for 200,000 new private sector jobs in august. the bought to.of the hour, first reinvestigation vision to second quarter productivity expected to be removed from the initial one.
the beige book out at 2 p.m., region by region assessment. of the u.s. economy. time for a meat flash, early look what is moving in the premarket. dom chu joining us from cnbc headquarte headquarters. what are you looking at? >> good morning, sully. navistar, shares down 14% in the premarket. this truck and enginemaker reported its 12th quarterly loss in a row as its results suf from restructuring cost and warranty costs as well, those shares down 13%. sears trading lower this morning, retailer's k mart division paid $1.4 million to set al u.s. case charging it with inducing medicare ben fishies to fill prescription at kmart pharmacist. those shares down by about 2% on lighter trading. and netflix making a move to stream its way into asia. the company's launching in japan today. netflix shares on a wild ride so far, along with the rest of the markets here, down 8% yesterday, right now, up 1%. the roller coaster ride that is netflix continue bus remember, it is still the best performing
stock in the s & p 500 on a year-to-date basis. back to you. dom, thank you very much, again, dom chu. all right, guys, just some breaking news from bill gross, janice capital management, formerly of pimco, latest monthly investment outlook is out, we just got it looking through it here, you will forgive me for looking down, read a couple of things. well, thank you. just add -- paper appears out of nowhere. the best in the business. all right. here we go still looking down. gross talking about how the fed should raise rates in september. not saying they will, he is saying they should. but here's the big caveat, gross saying it should be more of a one and done type situation do this for normalization sake bar six months or longer, perhaps stay on hold. looking for opportunities, gross not seeing many of them. in fact, saying, i am going to read this directly, cash or better yet near cash such as one to two year corporate bonds with my best idea of appropriate risk
reward investments. the reward is not much. but as will rogers once said during the great depression, i'm not so much concerned about the return on my money as the return of my money. so gross saying this zero interest rate policies have distorted financial markets around the world, heard that before, cash or near cash. i think he is right on what they should do however, does does the fed, after staying in july they weren't ready to do it taking a look at what's happened in global markets and say now is the time to raise a -- >> because i don't think the federal reserve should let the global financial markets push it around. i think they have to show they are bigger than the stock market. >> even larry summers pointed this out, i think a week or two ago in the financial times, says there's three mandate, not just the dual mandate anymore. the third is trying to make sure there is market stability and that factors in. >> fair enough, becky, but basically done everything they can expect say they are going to raise rates soon. >> a month ago, six months ago, eight months ago? >> perhaps. that's what gross argues, i just
scanned through it, maybe a little too late too late for the fed. how about this? if the fed doesn't raise rates, would that create more markets instability, everyone is expecting them to raise rates? >> expecting them anymore -- >> maybe not september, december, january, not fixated on the dates. >> i think september is a tougher thing, given what we have been through. >> people who know. hopefully. >> chris highsing is the chief investment officer, bank of america's global wealth and investment management units. they have more than $900 billion in assets under management. and craig lazzara, global head for s and p dow jones industries. welcome both of you to the table. what do you think? how does this change the scenario? what should they be doing? >> the good part is everybody has an opinion. that's what drives markets. >> this is morning television. good news is your opinion is your opinion.
>> and they all stink. >> i didn't say that. my point here is this they have to get the balance first and they haven't gotten to balance yet. what does that mean? not really sure. they haven't said that conditions are balanced. financial conditions, as you stated before, are not. so, that whole balance picture is not there yet. should they go or shouldn't they go in september december, you would say so yes, by their dual mandate in some cases, particularly employment they should but the key now going from a fright ride, which is this -- which is what we are going from now to a joy ride the only way to get back to a joyride is to have the real fundamental earnings and gdp growth, particularly in this country, start to show that it's transparently improving based upon rising real incomes, low commodity, low energy costs, et cetera. >> before we feel very sorry for ourselves, you should nut in a little bit of context for this, we feel terrible about what happened here with the u.s. markets, the month of august you point out around the globe --
>> as a point of reference, the s & p 500 down 6%, the best performers among the developed market, europe down 7, asia down 10, depending where you look, australia down 10. from the standpoint of relative performance, not so bad here, you think why is that, if the thing that's driving the decline is worries about the strength of the chinese economy and the strength in the integrity of chinese economic data even, u.s. is much less exposed than the rest of asia, and australia and europe. a pretty lousy feeling of comfort f you're down 6%, don't speak as much as everyone else. that's what you go it's an interesting market in the sense that when you think about declining markets that we are in three ways one might mitigate the damage, one is simply by stock selection. you pick the ones not going
down. that has not been particularly fruitful in the near term, anyway, because the dispersion between the best performers and the worst performers in the u.s. and really globally is quite far this row. >> dom chu ran the numbers and there's only five stocks in thesome and p 500 that are actually up. >> yeah. >> so talking about a minuscule. >> a very tight range. second way to mitigate the damage is widen diversification, the correlation between the stacks in europe and elsewhere are quite high, means that doesn't do you much good. the third way is market timing, just step out. if you're good at that great. >> i would add to the fact that another overused word, put things in the context, we are up 200% and to have a correction like this -- >> from the lows. >> from the lows, to have a correction like this is frightful and hard to rebalance during the flightful periods, if you go back and look what the is driving the rebalancing of the
world growth now, shifting from the emerging market heavy asset, fixed asset, china driving the world for many, many -- for two decades to the developed world overall having the consistent rising income stream that benefits more from lower oil prices, lower commodity prices, despite if the fed uses them in september or december. >> do you think pull back was a deserved one? >> absolute laich deserved one based upon overvaluation from the standpoint of where multiples got for a very short period of time, 18, 19, depending what earning space you use, took 17, 17 is the multiple. should be overvalued above that? should then undervalue bead low that? . no should be around 17 using a earnings base for next year. >> you think this is fair valuations? fair valuation and should a fair val base for an extended period of time through the next beg of the bull market. >> we have the ii survey showing
people are more bearish on that market than they have been since 2009, fewest bulls, then bill gross' investment letter hitting, a sure a lot of the public read this invested in the market, saying cash is where he thinks people should you can if you take him at his word, an extraordinary statement an indictment of stock markets showing anything like the gains they have shown and a real break in some ways from the kinds of returns we have seen in the market. is he totally wrong? >> far from me to say bill gross is totally wrong to say cash is the only place you could be is imp police siltly a forecast. or near cash. >> fair. fair. is implicitly to say the stock market is still overval owned going down. i think chris made a great point earlier, you have to put the decline into some context. chib nah, for example, $100 in into a chinese market years ago, got to a hay of $400 in april
and now down to $300, more or less, maybe 280 after yesterday. still, a tremendous rate raitt of return. the same in the u.s., went from 100 to maybe now 200. a good return. but the -- you don't get scared by the depth of the chinese drop because it comes in the context of a tremendous run-up that preceded it >> one other thing, looking the near cash, something to be in, it really depends on what your liability stream s near cash is managing to an index, i have to outperform this index. you own a collection of bonds, high-quality munis, good mortgage-backed securities, you can i can significantly outperform near cash. brian you followed this for a long time, how long is a statement like this from him not that unusual. he has frankenstein and zero this interest rate policy, i think bill has the gotten i
don't want to speak for bill, interviewed him many times, bill, it is really early, come on the show today, he has grown more and more frustrated by the dislocations he think the fed has caused and i think his frustration and others, people have waited for this sort of debt collapse to come but we haven't had it right, we have not had it i think that's been frustrating. cash is probably a point of view. >> upset with the us a terity, the developed world has to stand up and what he -- and quite stark language, a terrible movement to austerity and more to support the economy. >> the last time we spoke, he does love certain things, certain mortgage-backed products he loves, short-term corporate rates, he loves mexico and been some emerging markets have appealed to him as well. >> emerging markets more than anything. >> i don't know why we are not focusing more on europe, greece down 22% in a month, talk about every day, now we don't mention it.
>> anyway, gentlemen, thank you for soming in. coming up, breaking news from adp, private payroll data after the break a big focus on jobs, we headed to this friday's key government number for that meeting a few weeks. future showed the dow 150 points above fair value, s & p 16, the nasdaq, 45. we will be right back.
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okay, folks, here we go, we are just about to get those adp pay rolls, you can see the markets are indicated higher, joining us now, steve liesman. >> adp up by 190,000. just a little bit below the 200,000 estimate in august. adp down to 8,277,000. look at the details, good ups 17,000. pretty strong number, services always the better one of the two, up 173,000. this is a touch light. nothing i would change in terms of the consensus estimate.
construction once again going a good morning going on, you said a bubble? >> we will talk about that in a second. manufacturing, pretty strong for manufacture considering the drag we have had from the dollar and weak overseas growth, good across-the-board job growth. and then one more thing i want to show, by industry size, and again, across the board, good, small business led the way and large business the laggard here, up 40,000, medium business up 66,000. let's bring in mark zandi, joining us, the economist who puts this together with moody's analytics. mark, are you there? there you are. >> i am, steve. yep. >> excellent. give us your take on this number. >> in line, rock solid, creating close to 200,000 jobs almost three year, some periods a little higher, some periods a little lower about 200 k. this number is very, very
consistent with that the only weakness has been weakness all year in the energy sector, only sector really laying off. other than that job growth of varying degrees. i say good, rock solid. >> where is the weakness from energy? which particular sex tore, trade, transport, utilities, construction and manufacturing, why do you find that weakness in your data? >> yeah, it's not in the data that you're seeing, the data, more detailed data, really energy. the energy sector has lost about 80,000 jobs since the peak, the peak was december of 2014, been shedding jobs all year. the job loss is somewhere around 10,000 per month. i think that continues the next year or. that's where the weakness is. the relative strength you saw last month, strength is all vehicle related. see that auto seams number yesterday, it was boom-like.
>> i wanted to talk about it the trouble is nobody says boom anymore, boom to bubble. >> that's boom. that's boo >> boom verse a bubble. >> oh, yeah no, that's resting on solid foundations a lot of pent up demand because vehicle sales have been weak for so long. when you have gasoline prices at $2.50 per gallon, which is where we are at nationwide, that take makes driving a car a lot more affordable, juicing things up. the other thing is the housing market is, here i would say booming, not a bubble, it is booming, that's driving truck sales a lot of the contractors, they get the big f-150 trucks, i don't know all the makes, but that's driving a lot of that billion is. >> so people buy the -- the contractors buy the trucks. >> exactly. >> so we are going to do -- >> steve i wanted to make one point. >> goes for t. >> i did want to make one point, key point, technical point, very important one. the august bls number, comes out on friday, which everyone keys
up on, that's likely to come in on the weak side. seasonal adjustment problem, always in august, number biased down by 25, 50,000 per month. so very possible, even likely adp number is rate, a bls number closer to 160, 165. >> didn't we have a august number reported down in the middouble digits and revised to the triple digit wednesday it finally was revised? >> think it was august of 2010. august 2010 was important because we were just coming out of the investigation and everyone was in panic mode, got a zero print, literally zero. and then after all go back and look at 110, 120. always comes in light. has a lot to do with the seasonal summer workers, gets revised up. >> two points i got to make here. i thought one of the most important things that happened
yesterday on this show was my question to phil lebeau what these auto numbers mean for manufacturing and for production at the auto manufacturers, he says they have to ramp up. so do you see a line from these auto sales numbers to better growth numbers? >> yeah, the vehicle sector, you know, runs deep into the economy. it has one of the -- what economists call largest multipliers. for every job created in a vehicle assembly, that creates routely 78 jobs in the rest of the economy, a big multiplier. that's very important to lifting activity throughout much of the country. >> so the last thing is, i don't know anybody really cares how many jobs we created in this country anymore, all anybody cares about is what it means for the federal reserve? this number gives about you confidence the job numbers are improving? >> look, i think the job market is rock solid. it is doing what it's been doing
for almost three years, it is creating twice the race of jobs we need to absorb the working-age population, but i think that august number, the first printer the number we are going to be looking at is going to be south of 200 k, think that's the threshold for the federal reserve to have make a decision to raise rates in september. below that awfully hard to do that in the context of the volatility in financial markets. unemployment rate going to decline, 5-3, 5-2 or 5-1. >> think a tolerance for the number. >> you think they will raise? >> good jobs report, market volatility camel down and doesn't look like the foreign economies are going to tank the u.s., my completion. i think it's on the table. >> i agree. >> because we agree. >> what day is the meeting? >> it is wednesday and thursday this year, just be a little
careful. when you plan your trip down to d.c. or whatever you're going to do your family gathering for the fed meeting, do it on -- >> going to talk more tomorrow. i haven't probed your brain enough about jackson hole. >> you can always call me from vacation, becky, i'm available. >> call me. >> call me. >> thanks, steve. coming up, more economic data on the way, i know you can't wait. productivity revisions due out in eight minutes' time. get you those numbers, the market reaction, futures indicating a hire open and then, after tanking 8% yesterday, crude oil down again this morning off 1.7% to 44.63 a barrel. lou this volatility remain in the oil market? we will go inside those numbers, lot to do, "squawk box" will be back right after this. ♪ no student's ever been the king of the campus on day one.
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group, said the recent pull back provides an attractive entry to point for the shares. citi points out the upside from the recent acquisition of directv, shares up 1.5% on 55,000 shares of volume. disney outperformed rating, $114 price target by analyst at clsa, believe the consensus is underestimating the company's earnings in the next two years, see upside driven by the film studio side of the business, among other things, shares up with a percent on 18,000 shares of volume and casino giant, bin laden, upgraded from buy a buy over its target price was cut to $104 from $117 them the analyst rights can recent underperformance among otheren reasons, outperformed, a buy, a dunn grade, shows shares up 2% >> been a big part of the weakness here and that story because of the macao gaming revenue side of things from china. back to you. >> dom, still trying to get my head around what you told us
earlier this morning, digging through, looking for companies that were doing well, you said that there were five stocks in the s & p 500 still up year-to-date, right? >> no, so what it was -- to clarify. >> i was gonna ask. >> there are 17 -- we basically looked at performance these stocks in the s and p 500 since the market melees began, put at the end of august 17thing close of business there. we looked at the number of stocks that are still positive since that time and then filtered out from there, guys. >> dom, thank you. >> still extraordinary. coming up, breaking economic news, a check on oil and jim cramer from the knock stock exchange. look at u.s. equity futures, dow looks to open higher at 150 points, both -- understands the life behind it. those who have served our nation. have earned the very best service in return. ♪ usaa. we know what it means to serve.
welcome back to "squawk box." breaking news, second quarter, final productivity, unit labor costs are out, productivity, the magic bullet. greenspan's turn up 337, much better than the last look at 1.3 an hotter than just below 3% we were looking for. as a matter of fact, 3.3, that's the best level since the fourth quarter of twitter. that is a dynamic number. we all know productivity is
lacking. maybe that's why gdp growth is a bit light. now, let's look at the counterpart, unit labor costs, looking for a number just a spit north of down 1%. last week, up half of 1%. down 1.4. down 1.4. and then how does that figure in? well, down 1.4 you'd have to go back to the second quarter of 15e 4 to find another negative number, which happened to be minus 3 and a half. all the other numbers have been positive. of course, dropping unit labor costs and rising productivity, they sound like a pretty good thing and they are. maybe if you're looking for jobs, they are not, which is one of the issues, decent job growth and really soft productivity. listen, a little by the lathe on adp. all things considered before any of the data was out, we were 215, 2119 in a 30, now 260, 292 respectively. we still have factory orders and of course, lots to talk about before the opening bell. let's see, brian, kelly, back to you.
>> rick, thank you. the debate here raging. for more reaction to the numbers, bring back our steve liesman, also bob bruce ka, and dan greenhouse, chief global strategist at btig. unit labor costs, they have to be gdp, we knew there would be an upward revision. so much of the growth comes from the services sector. hard to keep the productivity numbers up. the good sector, proet duck if the sector of the economy, predicting manufacturing and that sector continues to shrink, a downward guy bass to gdp and productivity. >> dan? >> a larger view of this or make a larger point. wall street around the state pays little attention to the number in general, that's true today. >> the trading day >> of course, my point is you could probably not be out of step saying this productivity number is the most important number of all the numbers that come out at 8:30 because of how important it is for gdp and the
fed and economy and that regard, upward division, however temporary it might be, incredibly welcomed development. 3.3% number looks great, steve, does just reflect, talking about worker output per hour in the economy, the economy is growing that fig lure will look better. you were at jackson hole. >> why dan said it is the most important number it is the most important number how we live, the quality of our life is died deeply to our productivity. if you want, go back to live in medieval times, we harness the yolk to the oxen. in general, the story is lousy productivity and a real conundrum for economist and technologists, we look at the hand-helds out there, by the way, one of my pet theories this is ruining productivity. >> i agree r
>> e-mail. [ overlapping speakers ] . >> one thing bob talked about, more of the economy services how do we measure productivity in services, intuitive feeling and something productivity is lower, fed may have to move faster. higher, gives the fed a lot of wiggle room here, same thing in '96, greenspan saw the productivity boom happening an fought with yell ton say no, not going to raise, a very, very important time in his career. >> this change -- so bob, what steve is saying, fed to raise rates in september, this doak it because the speed limit of the economy is really low, apple employment, this is as good as it gets or do it because, it looks like we have more oomph, even if that means we have to suck more work nears that, for a time, the unemployment rate stays higher? >> the problem with productivity it is very volatile, we have a 3.3 it number what about next quarter? back with a weak number.
economist don't forecast productivity well, we can't even explain it very w heard of the variant you don't explain. i think you have to be careful jumping on the number. as far as the tech raising rates, the fed's conundrum raising rates whether say inflation is on a path to 2%. it has two metrics that have to be met. they can argue the labor market looks like they are improving a hard time making a convincing argument, inflation headed to 2%. >> dan, i have got three question to us followed by a comment. is the stock market the economy? is the stock market the economy? is the stock market the economy? i don't think the stock market's the economy. >> would it be shock fig told you the answer to those three questions were all different? >> no not for an economist, no, actually. fortunately, i'm a strategist. there is a big difference. the stock market is not the economy. i want to make a comment about raising rates in september.
i think they will raise rates in september. issue, i can't emphasize this enough, charity does it everybody does it but it really seems to get lost, the day of liftoff means literally almost nothing in relation to the path thereafter. and i think with respect they should or shouldn't -- >> you are saying they are going to be one and done, raise it in september? >> fisher said it, the most -- it was the most clear statement yet when he said we may do this and we will likely wait for, i think it was quite some time, the exact language, something along the lines. >> there is a lot to like about the one and done camp, for a number of reasons. toe we don't have time, need another segment, i don't want to do diser is straight person coming after mesh the one and done a lot going after it. i don't think enough attention gets fide what happened in japan in the 2000s. they made a big snakes and think it should be a larger story for us. they did quantitative easing from 2001 to 2006 and the second that inflation rebounded, they
abandoned quantitative easing and began to tighten monetary policy. >> bob, just briefly before we have to go are you also the one and done camp, thank you is a good idea? >> the problem with it is that all we will know is once they raise rate, we won't know if they are done and the credibility. the problem is that the time series going back is this flat line low, right, once they raise rate, we are in a different virnlgt the market is going to have expectations, we will not know. >> which is why -- which is why -- [ overlapping speakers ] >> don't come on the show and be less aggressive in your language than you are in your notes. you used in a note a week ago, you said the fed would be crazy, capital c-r-a-z-y, the hike. you used the word crazy. think if the fed raises, rates they will have a lot of explaining to do about the inflation component to me, not on track. >> the idea in july pre we weren't ready.
things are have the only got worse. [ overlapping speakers ] >> brian made that point earlier today, i'm working on the numbers now, hard to find an affect from china that's bigger than .2 or .3. >> you said yourself, steve, if the market was swinging with 4 and 500 points -- >> a different story. that's different story. i don't think the fed wants to add fuel to the fire. i think, you know, fisher very clearly gave a criteria of stable markets before hiking. but you know, in his idea, hey, these things could calm down quickly. >> it is september. >> make a quick point about inflation. another segment for this one. >> too stupid to talk about this? [ overlapping speakers ] >> no. no. no. no. no tired of china. can't hike because the inflation data is not cooperating. what if i told you after six years of zero rates and quantitative easing, the rate would be closer to 1% than 2%? en a argument to be made, need a lot more time than this --
>> its core inflation rate closer to 1%. >> an argument to be made that raising rates doesn't necessarily dampen inflation to the degree we once thought it might? >> a fine argument, the point is the fed has two criteria that have to be met and the criteria isn't that race is the been too long for too long. >> i'm going to switch sides on this now. >> here to s drumroll. >> down. that's one of the two criteria they have to be looking at. the unemployment rate falls again, crazy not to be raising you it >> the participation rate makes the unemployment rate. >> inflation -- [ overlapping speakers ] >> inflation measured by the government a dead measure, reflective of nothing. t-shirt costs, flat panel tvs. number two, why are we so obsessed with china slow down when our biggest trading partner in the world is in recession? canada is a bigger risk to us than china, in my opinion, because they are the single biggest -- >> just nouflts wrong place, brian. >> i should be arguing this in
our toronto bureau? what happened? >> you just argued for them not to raise rates and now just for them to raise rates. >> that's what's makes this show so good. >> lots can happen. >> when i'm not here. when i'm not here this show is excellent. canada, baby. america's hat. >> got to talk about my interview i think they want to see. jacob lue. isn't it beautiful when things just come together? build a beautiful website with squarespace.
commercials. steve liesman mentioned before the break, tune in for his exclusive interview with the treasury secretary, jacob lieu, 6 a.m. eastern time, clips all morning long. >> what a genius kelly evans is? >> yes. tell why? >> i can't, key with don't have time. >> i don't even know what you're talking about. ample good thing. >> because canada. >> the producer, i can't take credit for it china a threat to america. in the wake of crude prices getting crushed, transport getting trounced but a couple names thought that maybe poise forward pop now. our morgan brennan has been doing digging for us and come up with a couple names worth another look. hi, morgan. hey, kelly. that's right. so, let's talk about oil. fuel is a huge cost for transportation companies and with crude down more than 50% from a year ago there have been some beneficiary, take the airlines, unlight freight carriers adjustable fuel surcharges, united, continental, american lanes, delta and jetblue don't necessarily pass those savings on to customers, meaning fuel a big tailwind,
ea diesel lower than a year ago. warner, night, covenant, not only does this lower cost but savings at the pump translates into more spending by consumer, means more demand for these types of truck because lot also depends on what's actually being transported. less than truck load carriers, trend to haul more industrial goods and raw materials, a much harder time since they are more exposed to drilling and manufacturing, wait on companies like conway and yrc worldwide. a similar story forrers are, csx, northern southern, kansas city less crude, less fracti, less steel moving by rail, less coal as cheap nat gas has hurt demand. brian? >> morgan brennan, thank you very much. speaking of oil and those transport, a check on oil because yesterday, we dropped more than 8%. this coming off of a nearly record breaking three-day rally. crude oil weakening from
yesterday. selling continue, 44.79. brent below 50 at 49.29, down one half of 1%. if you missed it, earlier on "squawk box", steven shork shared his thoughts on the recent oil swings. >> certainly, at this point, oil at around $40 a barrel is disconnected from reality so there is no economic line to lean against. so we are all trading on psychological numbers right now we broke 40, taken out that psychological barrier. the next bar jer the 32.40 low we saw during the depths of the great recession. >> the vice president of financial service attism hs energy joining us now, rose say dejuan. mid-30s, high 30s, flu that camp or see prices going higher from here? >> i think prices are looking for a new band to trade n i think right now, we are trying to study $50 oil band because
the one we had earlier between 45 and 60 kept production rising in the united states. so we need to find a new band, lower prices, to adjust the supply to the lower demand we have. >> what do you think is going to turn this, rose? when will we get a meaningful decline in daily oil production in america? >> we need lower prices, obviously, at 50, $55. getting here to redetermination of loans, looking at the end of year we believe we are going to see cap x going down in the united states and these prices, sub $45, believe by the second quarter of 2016, oil production in the united states will have dropped another half a million barrels per day. >> given joe kernen's love for the shock "the walking dead," i
will use this analogy, rose, 50 or $55 oil a zombie market where producers are making just enough or breaking even to keep produce and keeping those numbers high? is that a worse case scenario? >> this way, i don't think we can have these prices because it keeps the market unbalanced. i think in the next two quarters, likely to see the violent swings to find that ban and within two or three-quarter, the u.s. production will adjust by half a million down and the second half of 2006 look more balanced in that case. >> roger diwan, good discussion, roger, leave it there thanks for joining us. >> bye bye. >> when we come back this morning, we will head down to the new york stock exchange and hear from jim crime ber these wild swings in the markets. he will tell us what inspectors can expect today on wall street. check out the futures this morning, bouncing back. at this point, looks like the dow futures up almost 2 pound points, after a 470-point
welcome back to "squawk box" on cnbc. i'm here what w your market flash. up th up thor ware is tracking toward the high end of expectations. expectations in indonesia, france, and italy. those shares up by 2 1 /3%. the recent selloff in the stock is a recent buying opportunity. pnc was upgraded. and has bro upgraded both on valuation following a recent pullback in benefits from the introduction of the new star wars themed toys. back to you. >> thank you. we'll see you again soon. >> right now let's get down to the new york stock exchange. jim cramer is standing by, and
jim, what do you think about what we've seen. anybody who thought the volatility was over last week got awakened last week. now what? >> a few players. it doesn't mean the direction changes but there is incredible ill liquidity. i have a fantasy cheat sheet for stocks and football players. only about.1 of the s&p took out monday, tuesday lows of last week. there are people regarding today's rally as meaningless, but there were a lot of people who looked at the cheat sheet i did and said that's a successful retest, and given the successful retest and the bearishness and the fact that we haven't really had a lot of fundamental news. china news was bad, you're going to get a bounce. and all bounces and declines are more pronounced. i could argue the only place it's been worse in the last few days is brazil.
china being propped up because of the end of world war ii celebration. this is a rally based on the fact we took out only one tenth of the lows in the s&p. >> it's impossible to call a bottom, but it is beginning to feel a little better to you? >> i was looking at the october 4th of 2011 wall street journal. it's the fairest one i can recall. we thought that europe would go under. there were other problems. that was the exact bottom, the day that we bottomed well ahead of the bad news that went on in europe in 2011. 2011 is the operative analog. we were down 17% then. we're down 12 % now. i could argue the 5% is what we could have if we get china devaluing again ahead of when
fischer says they're sanguine or whatever. and then you have a situation where you hit the dow down 17 and have to buy. >> if there's one thing you're watching, is it data, the markets? what's the most important thing to watch today? >> i'm watching the fact that even though oil was parabolic and is coming back, there will be a level will people no longer want to be short oil and where people recognize you get crushed if you get shorted. and that level is probably going to be 35/38. that's because a lot of the people who hated oil all the way down went bullish under 40. they get to 40 and still hates it, get to 35 and saying enough is enough. just when a lot of the energy experts that i deal with say now it's really bad. i'm going with a lot of the guys who didn't like oil who in the mid 30s say there's no such cap down.
the cap ex shut down is remarkable. iran is all puff. i'm tired of hearing they're going to produce 2 million. i don't see a single guy from schlumberger there. and given the fact that this market trades with oil, i think you're okay. >> thanks, jim. google getting a logo makeover. we'll show you after the break. there's more "squawk box." charles j. guideline guideline guideline wits. guideline wits.
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let's give you a few of the headlines. we got the adp report. it came out with 190,000 new private sector jobs were august. that was below the estimates of august. the janice capital fund manager says given what's happening with the global happenings, a one and done rate hike appears to be the likely scenario. and the mortgage association says they led by a 17% jump in refinancing activity. >> is japan ready for house of cards and orange is the new
black? netflix is launching in japan today. netflix shares on a wild ride. down 8% yesterday. right now trying to bounce back at 3%. >> google unveiling a new logo. it's a new look since 2013. the most dramatic change in more than a decade, the new logo has a flatter look and changes the font. google created the font. it's supposedly more readable and scaled down for phone screens. >> i like the old way. >> if it ain't calibri, i ain't reading it. or arial bold. >> it has been a valiant fight all morning long. the dow futures up just over
200 points. that's a gain of 208 points if we were to open now. the nasdaq is up by about 63 points. this is no way making up for yesterday's losses, but it is a substantial move higher this morning. you're seeing that reflected in europe as well. brian, kelly, thank you for being here today. >> thank you. >> i'll see you tomorrow, kelly. that does it. right now it's time for "squawk on the street." ♪ >> good we understand morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer at the new york stock exchange. david faber is off today. premarkets trying to build off the lows of yesterday. the third worst day of the year for stocks. china managed to have a relatively quiet close. adp pretty decent. ten-year around 2.18. oil, inventories and the storage data suggests another build. the road map goes like this. futures higher after